JPMorgan Chase accused of rigging energy markets

JPMorgan Chase developed schemes to sell electricity at falsely attractive prices in Michigan and California, according to The New York Times. The market manipulation could result in JPMorgan Chase receiving penalties from the Federal Energy Regulatory Commission.

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The lobby of JPMorgan Chase headquarters is shown in New York. The nation's largest bank is facing the possibilities of stiff penalties from the Federal Energy Regulatory Commission, a low-profile agency charged with regulating the sale of electricity.

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JPMorgan Chase is reportedly accused of manipulating energy prices to make money-losing power plants seem profitable.

Between 2010 and 2011, JPMorgan Chase sold electricity to authorities in California and Michigan at prices “calculated to falsely appear attractive,” reads a confidential government document acquired by The New York Times.

The nation's largest bank could face stiff penalties from the Federal Energy Regulatory Commission (FERC), a low-profile agency charged with regulating the sale of electricity. FERC has not yet made a public statement about the investigation, but analysts suggest the regulator is likely to pursue charges. Call it the "Enron effect."

"In 2001, FERC acted as if market manipulation was a sort of boys-will-be-boys situation," Frank Lindh, general counsel at the California Public Utilities Commission (CPUC), said in a telephone interview. "Now, they seem to be taking it more seriously."

While not directly involved in the current investigation, CPUC continues to seek billions of refunds from companies involved in the 2000-2001 California energy crisis, Mr. Lindh said. In that case, market manipulation caused a shortage in electricity and multiple widespread blackouts in the state.

Enron Corp., the most infamous of the energy companies involved, used accounting loopholes to hide billions of dollars in debt from shareholders. The company's stock plummeted to less than a dollar in mid-2000 and it filed for bankruptcy in December 2001.

The agency has been active recently, issuing its largest fine ever to London-based Barclays Plc last December. The bank faces $488 million in penalties for a “three-part manipulative scheme” to rig energy markets.